Making Sense of Your Student's Financial Aid Award Letter
One of the most challenging aspects of being the parent of a college student is navigating the financial aid maze. If you filled out the Free Application for Federal Student Aid (FAFSA) to help your child get funding for school, the financial aid award letter will list what type of aid your child qualifies for and how much.
It sounds simple enough, but if your child applied to multiple colleges, the aid package may be larger at one school than another. If cost is a factor in where your child goes, taking a closer look at the financial aid award letter can help with the final decision.
Be clear about the cost
First things first, calculate the cost of attendance. That includes tuition, fees, room and board, books and supplies, transportation, and personal expenses. If you're comparing award packages – and the cost of attendance isn't listed on the aid letter, or the figure only includes tuition and fees – add up the numbers so you have an estimate of how much money your child's going to need for school.
Compare the cost of attendance to the total award package
The next step is determining how much of a shortfall, if any, there is between the size of the award package and the cost of attendance. There are two specific figures to focus on here: Net cost and out-of-pocket cost.
Net cost is the difference between the cost of attendance and the total aid package. This amount should be similar to the Expected Family Contribution (EFC), which is a number that's used to determine how much aid your student qualifies for. Out-of-pocket cost is the difference between the cost of attendance and the parts of the aid package that don't have to be repaid, like grants or work-study funding. This is the amount you'll pay to cover any gaps in the aid package.
Break down the types of aid being awarded
There are two basic types of financial aid students can qualify for: Need-based and non-need-based. Need-based aid is determined by your child's financial need and includes:
- Federal Pell Grants
- Federal Supplemental Educational Opportunity Grants (SEOG)
- Federal work-study
- Federal Stafford subsidized loans
- Fee waivers
- State grants
Non-need-based aid includes things like unsubsidized loans, Parent PLUS loans, and merit-based scholarships. It's important to understand the various types of aid being offered, especially if you're comparing award packages from different schools. Grants, scholarships, and work-study awards typically don't have to be repaid, but loans do. If one school is offering more of the former, while another school would require more loans to pay for the cost of attendance, that could make a difference in where you’d like your student to go.
Be aware of how adjustments may affect aid awards
As you're reviewing the award letter, be sure to check the fine print. If your student's enrollment status changes – say, for example, your child opts to attend on a part-time basis versus full-time – the school can adjust its award package accordingly. If your child’s package shrinks too much, you'll be responsible for making up the difference. That's something you'd want to be aware of in advance so you can tweak your budget accordingly if needed.
*All content provided in this blog is supplied by Rebecca Lake and is for informational purposes only. Barclaycard makes no representations as to the accuracy or completeness of any information contained in the blog or found by following any link within this blog.
Image credit: Shutterstock